During quarterly earnings, analysts are constantly looking for debt profiles of companies. This is really important as lack of capacity to service debt could be very devastating to a company’s overall financial health. Too much unserviceable debts and a company is moving towards bankruptcy.
However, I tend to see this through another lens. Yes, I hate debts on company balance sheets. But a season of debt could also help managers to be become efficient in managing resources. When a firm goes through a season of austerity, managers could learn vital lessons that will position them during abundance.
It is the same thing that happens to families. We tend to behave differently when we have so much cash than when we have to borrow to survive. You learn great lessons under tough times that helps sustain you when good times arrive.
Understand that I am not approving debts, but I can carefully say that the lives of the Greeks and Britons may be different after their governments go through their redesigning processes. So, having so much debt can actually become an instrument to rewire a nation from unsustainable habits.
Debts are not all that bad. Only few companies in this world were built without debts. What is really bad is when the debts were obtained recklessly without a plan to service them. America prides itself as a superpower, but it is also the world’s most indebted nation. It is the superdebtor of the universe.
You may be ignorant to meet Mr. Obama in the next UN Summit and open a discussion on debt forgiveness to the United States. It is debt and it is America and no one should bother. But if it is Ghana, it becomes a troubling problem to the IMF or other world leaders.
That brings another point. The person that owes the debts matters more than the debt. In general, a world without debt will be really difficult. The guy that invented money from barter system did us a favor, but the guy that created debt made the world a better place.
I prefer to have all Africans take debts, live in good homes, enjoy the goodies of lives, than not getting those because there is no way to save and pay cash for goodies of lives. Their counterparts in US could own a home by paying less than 5% of the worth. That is debt, but the person has a better home and can have fun for the few years Nature has given us in this planet. The African is perpetually hoping to save 100% for the home which rarely materializes. That reminds me that it is time those leaders modernize the economic structure of the continent.
More debts people and let them spread them to Africa. We need them! A little debt could do you good.